Manchester – the home of high yields

Manchester, the heart of the UK’s Northern economy, is becoming an increasingly attractive option for buy-to-let investors. And for good reason: higher-than-average yields, a young population, and a rich history and culture all play their part. 

If you’re planning your next UK property investment, could Manchester be your best bet? We’ve taken a look at the city’s rental market, its demographics, and expected regional investment to help you decide.

Manchester’s property market

Housing market

The regeneration of Manchester has had profound effects on the housing and rental markets within the city. Firstly, for capital appreciation, Manchester has been one of the top-performing cities and regions in the UK since the early 2000s. 

Focusing first on the overall property sector, Manchester has outperformed capital gain against the median England & Wales property values by over 50% over a 5-year period (34.0% for Manchester vs. 19.8% for England & Wales). The capital gain in Manchester equates to an annual growth rate of 6% over the 5-year period, 5% over 10 years and 7% over 20 years. 

The recent strong house price growth could indicate a tapering of capital appreciation, but the future looks bright for Manchester, too. Savills expects house price growth in the region to hit 18.8% over the next five years, compared to 12.9% for England & Wales. This equates to a 150% outperformance of the region, making it one of the most attractive places in the UK to invest if you’re looking for great capital appreciation.

Buy-to-let market

With a mix of relatively low prices (up to 40% lower than London), a large student population (100,000+), and the ongoing creation of new, skilled jobs, Manchester’s rental market is incredibly attractive.

Not only are yields high – averaging 7.2%, but increasing demand and limited supply of rental apartments make Manchester one of the best cities to avoid rental voids. The average time to rent in the city is just 14 days, one week less than the national average, according to Hamptons data. This makes the city a great place for buy-to-let investors to secure a steady income stream, with low risk for disruption. 

Manchester inhabitants are also highly reliant on privately rented homes: 62% of properties in Manchester are rented privately, compared to the national average of 50%.

As a result, Manchester was named #4 on a list of the best cities for buy-to-let investors in the UK by lender Aldermore. It was also #1 among major UK cities.

Manchester’s demographics

Population

Manchester is home to over 555,000 people. While that places it 6th in the list of the UK’s largest cities by population, it has the highest number of students and young professionals. In fact, 70.5% of its population is aged 16-64 – that’s 15% higher than the national average. Its young, upwardly mobile population makes it a great buy-to-let destination.

Salaries & employment

As of June last year, unemployment in Manchester stood at 5.3%, slightly higher than the national average of 3.8%. While part of this can be put down to the Covid19 pandemic, the city is recovering quickly – it’s seen a 2.6% decrease in the unemployment rate in the last 12 months.The rapidly decreasing unemployment rate couples with an increasing average salary, which now stands at £38,200. That’s roughly in line with the national average. An influx of highly qualified roles are driving this increase – today, there are over 175,000 of these roles in Manchester. This represents 45% of all jobs, a higher proportion than the rest of the region (39%), and the UK more broadly (43.5%).

Increasing salaries are making property and rent in the region more affordable, which has meant increasing house and rental prices over recent years. The house price to earnings ratio, the main metric to measure housing affordability across regions, stands at 7.6x, versus a national average of 8.9x.

Crime

Manchester is dealing with high crime rates. Violent crime is a particular issue, with the violent crime rate sitting 38% higher than the national average. But the good news is that these rates are decreasing – overall crimes reported dropped by 12% last year, which would bring it in line with the national average in the next five years.

Expected regional investment

Government investment

Manchester is at the heart of the UK Government’s ‘Northern Powerhouse’ strategy, published in 2016. By investing over £13bn across multiple Northern cities, the strategy aims to build a super-connected, resilient, and globally competitive northern economy, and create 4.5m new jobs.

Some of these investments are already underway, such as:

• £38m for the National Graphene Institute

• £78m for the Factory Theatre

• £100m to Manchester universities

  
  

Private investment

Aside from government investment, the Northern Powerhouse strategy is also boosting private investment as confidence grows. A great example is Manchester-based MediaCityUK, one of the city’s most ambitious regeneration projects. While this has been underway since 2007, a further £1bn has been committed to the project over the next decade to double its size. 

Another large project is NOMA, an £800m redevelopment scheme that will create a 20-acre mixed-use area. Amazon Web Services (AWS) became one of NOMA’s first tenants in 2018, where the company set up its first non-London HQ.

Transport

Manchester will be one of the main beneficiaries of the HS2 rail investment, which will halve the time it takes to reach London. The government has predicted that HS2 will boost the national economy by up to £15bn annually, with Manchester likely to enjoy considerable growth as a result.

HS2 will also connect more of the UK to Manchester Airport, itself only recently expanded. A £1bn investment added a second terminal, expanding capacity by 150%.

Manchester – a city ripe for your investment

With reasonable prices, an aspiring population, and growing regional investment, there aren’t many better places to invest than Manchester. But finding the right city is one thing – finding your perfect property is another. Thankfully, we can help you find that property in no time, without the hassle. To find out how, just book your free, no-obligation consultation.